Continuing its downslide, the rupee on Thursday lost 21 paise to end at new 10-month low of 56.38 on fag-end spurt in dollar demand after RBI Governor D Subbarao painted a dim macro economic picture fuelling fears of local currency plunging to record low levels in the short-term.
Ahead of expectations of steady US GDP and jobs data that may force Federal Reserve to consider early withdrawal of stimulus, the US dollar strengthened against major rivals.
The rupee, which fell for the third straight day, ignored the $140 million capital inflows in equities. Forex dealers said there was no sign of RBI intervention in forex market.
At Interbank Foreign Exchange (Forex) market, rupee commenced slightly better at 56.15 a dollar from previous close of 56.17 and improved further to 56.04.
However, it turned negative tracking Subbarao’s comments and declined to a low of 56.39. It finally settled at 56.38, a fall of 21 paise or 0.37 per cent.
Subbarao in Ahmedabad said CPI inflation is still high. “There are certain factors like sectoral imbalances...We have the highest fiscal deficit as compared to our peer emerging economies...Our external sector problem is large current account deficit,” he said.
In three-day downmove, rupee plunged by 81 paise or 1.45 per cent. In May so far, it has dropped by over 4.5 per cent.
Considering the global trends, rupee is likely to revisit record lows of 57-level, analysts said. All eyes are now on India’s Q4 GDP data that will be released tomorrow.
“The rupee was trading quietly but RBI Governor’s comments on CAD, balance of payments and inflation unnerved the currency. It can touch 56.6 level soon,” said Dhanlaxmi Bank Executive Vice-President Srinivasa Raghavan.
“Rupee movement was mainly due to month end demand for dollars by oil importers along with volatility in the equity market. Also, international factors like strengthening of dollar influenced the movement,” said N S Venkatesh, Head of Treasury of IDBI Bank.Global rally in dollar and concerns about India’s CADhas depreciated rupee in May despite of huge foreign inflows into stocks and debt. FIIs have pumped in nearly $15 billion in stocks alone in calendar year 2013.
Hemal Doshi, Currency Strategist of Geojit Comtrade, said: “While the intraday movement in rupee was mostly range bound, most of the fall came towards the end of the trading session, possibly due to the statement of RBI governor on high CAD level.”
CAD hit a record high of 6.7 per cent of GDP in Q4 2012 and was expected to narrow to 4-4.5 per cent of the GDP in the first quarter of this calendar year on the back of cheaper commodities.
Rupee is showing downward bias in near-term, Doshi added.
“Going ahead, today’s US GDP numbers and tomorrow’s Indian GDP figure will be closely watched by the markets,” said Abhishek Goenka, Founder and CEO, India Forex Advisors.
A weak rupee will make imports costlier, including oil and other commodities, that will have a cascading effect on inflation.
Meanwhile, premium for forward dollar fell back on fresh receipts by importers. Benchmark six-month forward dollar premium payable in October eased to 144-146 paise from overnight close of 146-148 paise.
Far-forward contracts maturing in April also declined to 30701-2/309-1/2 paise. The RBI fixed the reference rate for the US dollar at 56.0995 and for the euro at 72.7976.
The rupee dipped further against pound sterling to 85.28 from Wednesday’s close of 84.74 and also remained weak against the euro to 73.07 from 72.74.
Rupee also softened against against the Japanese yen to 55.49 per 100 yen from 55.44.
Sensex GAINS 68 pts
Sensex on Thursday erased early losses to close nearly 68 points up at over one-week high on smart rise in auto scrips like Tata Motors and M&M, ahead of much-awaited March quarter GDP data release.
Volatility marked the session with the the 30-share Sensex slipping between alternate bouts of selling and buying amid expiry of monthly derivative contracts today.
After touching the day’s low of 20066.14, the Sensex bounced back to close higher by 67.76 points, or 0.34 per cent, at 20215.40 on brisk buying in last 30 minutes of trade. This is the highest closing since 20,223.98 on May 20.
All eyes are on fourth quarter GDP data release on Friday even as growth is expected to be around 4.8-5 per cent, said experts. Positive trend in European markets also influenced the domestic markets, they added.
On similar lines, the National Stock Exchange index Nifty rose by 19.75 points, or 0.32 per cent to 6,124.05 led by stocks of auto and FMCG sectors.
“While the broader markets moved in a narrow band, movement in the stocks was determined by their quarterly numbers...It was a rangebound session on the day of expiry,” said Nagji K Rita, CMD, Inventure Growth & Securities.
Sectorally, the auto sector index gained the most by 2.29 per cent to 11,369.08 as Mahindra and Mahindra and Tata Motors surged on better quarterly earnings. The FMCG sector was second best performer as it rose 1.88 per cent to 6,925.17 as ITC shot up by 3.15 per cent to Rs 324.25.
‘India may import record 300-400 tons of gold in April-June’
With demand being robust due to fall in gold prices, India’s import of the yellow metal in April-June period is expected to touch a record level at 300-400 tonnes, according to the World Gold Council (WGC).
Unprecedented levels of demand in the last quarter owing to lower gold prices has led to depletion of stocks in a number of key markets. Jewellery shops in China and India have run low or in some cases completely out of stock, it said.
“In India, imports of gold are headed towards record levels in Q2 of 2013. We anticipate 300-400 tonnes of imports in the second quarter, as much as a 200 per cent year-on-year increase and almost half of total imports last year,” the WGC said in its market update for the second quarter of this year.
The country had imported only 153 tonnes of gold in the same period in 2012 calendar year as demand was lower because of record prices at that time.
Global gold prices have dropped sharply in mid-April from USD 1,535.5/ per ounce to USD 1,390 per ounce, it added. Despite the price fall in April, the WGC’s research indicates that sentiment towards gold in the two largest markets is still extremely positive, with 70 per cent of consumers in India and China anticipating a stable or increasing price in the next 12 months.